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- 2 - An amibitious High Speed line 8yrs, 15 BN investment program … with ever-shrinking budgetary capabilities 2004 : setting up of a government agency for transport infrastructure financing, to use money from the road (dividends initially) to finance rail Use PPP as alternative means of financing projects & transfer project ownership to private companies to seek for efficiency => More for less! Mediocre project profitability a major drawback (good projects done already!) EU Funding issues and PPPs Why PPPs ?

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- 3 - Project management Concentrations of funds (TEN-T) at pan-european bottlenecks => at the borders National sections are harder to get EU (TEN-T) financed, although have a european purpose. Example of the TGV East European coordination + cross-border coordination Project financing More for less: private sector implication, EU funding to decrease national funding of course Need to adjust the EU funding procedures (pluri-annual programme) to the difficulties of managing PPP projects (tender procedures) On the other hand, efficiency of PPP schemes for construction (milestone payments, full transfer of construction risk to EPC contractor) allows for strong monitoring of costs and control over planning EIB implication? EU Funding issues and PPPs Some issues to be discussed

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- 4 - Leverage new ressources for the rail sector with the usage of private funds (formerly 100% public funded), to face growing scarcity of public funds; Optimize global investment costs, construction and allocation of risks on rail infrastructure projects with a better integration of construction, operation and maintenance tasks => Lower the cost for the National community and lower the impact of the debt of RFF; Accelerate the development of the National rail network by constructing more projects in lesser time (PPP efficiency in construction) => Improve competitiveness of rail mode Inject some fresh blood in the system? PPP in the Rail Sector What rationale for the usage of PPPs?

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- 5 - « Classical » scheme, public tenders (HSL East, Rhin-Rhône ): RFF is project undertaker, subsidies to be put in place ab initio by Central and Local Governments + EU (TENT) Infrastructure PPP: RFF is contracting authority, public availability payments occur during the life of the contract, demand-traffic risk generally borne by Public sector. Some subisidies could be paid ab initio, but usually the bulk of them is paid during project life, thus making harder to fit in EU Funding Concession: Gov't or RFF as contracting authority, Public subsidies ab initio (National + EU Funds, paid during construction milestones), Project undertaking, financing and operation at the own risks of the concessionaire PPP in the Rail Sector 3 schemes to be contemplated

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- 10 - The Concession 1. The concession has been granted through a bi-national tender process (EEC Directive – 93/37) under the aegis of the French & Spanish States 2. The Concessionaire will Build & Operate the rail link (as an Infrastructure Manager), then Transfer it back to the States Design of the Project was undertaken by States (subcontracted to a JV formed by the 2 public railways companies – no infra managers) Concessionaire will build & finance the project at its own risk Concessionaire will receive a subsidy for the construction of the project Concesionaire will operate and manage the infrastructure (maintenance, availability, performance, security, …) at its own risk Concessionaire will levy tolls on Train Operating Companies (SNCF, RENFE, others) operating freight, passenger & high speed trains – tolling scheme will be specified in the Concession contract At the expiry of the Concession period, project will be transferred to the States in the exact shape it was at the opening of the line The Perpignan-Figueras Rail PPP project Tender Process

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- 12 - April 16th 2003 : negociation with Bouygues-Dragados interrupted May 8th 2003 : new tender published in OJEC April 16th 2003 : negociation with Bouygues-Dragados interrupted May 8th 2003 : new tender published in OJEC 1.A Tender as « closed » as possible Benefit from Tender 1 experience Major innovation : candidates are invited to bid on an non-negociable draft contract (except a few clauses), based on Tender 1 contract as finally negociated No technical options allowed to ease comparison Objective : reach a conclusion as fast as possible But doubts about number of candidacies and level of subsidies demanded 2.July 2003 : 4 candidacies RFF-GIF, ACS-Dragados-Eiffage (ACS bought Dragados during Tender 1), Bouygues-FCC, Ferrovial-Vinci All candidacies accepted, bids received October 7 2003 November 13: TP Ferro (ACS-Dragados-Eiffage) and Ferromed (RFF-GIF – the two State-owned companies) are invited to negociate with the two governments The Perpignan-Figueras Rail PPP project Tender Process (contd)

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- 13 - Concession contract signed in Madrid February 17th for a 50- year duration Construction costs = 952 M (Jan 03). 32% of costs related to tunnel Planning = 60 months delivery starting Feb. 17th 2004 Tolling scheme in the contract, with first 3 years of operations limited fee to allow for build-up of traffic (as set in terms of reference) State Subsidy = 540 M (57% of Capex), shared by France & Spain (50%/50%) & EU, paid during construction (milestones) Sponsor equity = 102,9 M, closing had 1 year to take place No guarantees : concesionaire will operate the concession at its own risk Penalty system : for construction, performance, termination, etc. Contract is made public (integrally published in French official journal) Debt = financial closing took place Feb 10th 2005 with a « project finance » scheme, 520 M with limited recourse on the sponsors The Perpignan-Figueras Rail PPP project Concession and Financing Scheme

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- 15 - Excellent collaboration between the administrations of the 2 countries on a cross-border project Long and discontinued tender Project team was mobilized for 3 years (costs, availability of people) Collaboration with EU Commission with respect to funding went smoothly: Coordination between the two member states a must Cross-border project and top-priority for TEN-T network allowed for substantial increase of EU funding PPP also a magnet for EU grants Unfortunately, risk profile was not compatible with EIB funding at closing Technically, a major project within the pan-european rail network Mixed usage freight/passenger high-speed First UIC-cauge connection to Spain Project on budget and on schedule! Next on the list, Lyon-Torino? The Perpignan-Figueras Rail PPP project Lessons Learnt

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- 16 - A breakthrough project for the rail sector : Strict application of the highway concession model to rail, a success so far for a project that was found difficult from the very beginning New player – private – between two public Infra managers Interaction with incumbent train operating companies (SNCF, RENFE) for both train operation and infrastructure management Proof that PPP in the rail sector is feasible, with effective & full transfer of risks to a private operator: Construction/completion risks Operational/traffic risk & maintenance risk Tender procedure was long and difficult but : Candidates and administration learnt from the process Major innovations have been successfully introduced Challenges still ahead Completion of Spanish connection lines delayed – negotiation underway Develop the usage and build connecting infrastructure projects The Perpignan-Figueras Rail PPP project Lessons Learnt